Confused clients often ask: “Why did the valuation change? It’s the same company!” Here’s why: it’s not about the business—it’s about the deal structure. A stock purchase is riskier for the buyer than an asset purchase with leverage. That means a higher required return—and a lower equity valuation. Backed by Nobel-winning theory from Modigliani & … Continue reading 💸 Why the Same Business Can Have Two Different Values
business valuations
📚 Valuation Myth: Projections Don’t Need Support
The Myth:Future projections are enough to justify value — no need to back them up. The Reality:Projections without clear support are just optimistic guesses. Buyers and SBA lenders need evidence — like written plans, assumptions, customer contracts, and operating history — to trust future performance claims. Why It Matters:Relying on unsupported projections can inflate value … Continue reading 📚 Valuation Myth: Projections Don’t Need Support
🎁 Resource Drop: Addback Risk Review Tool
📘 We created an Addback Review Tool to help SBA lenders validate free cash flow adjustments. Includes: ✅ What counts as legitimate✅ Addback audit checklist✅ Review questions 📩 Click here to grab your copy.
📊 Case Study: “Adjusted” to Death
Seller showed $450K in cash flow after $160K in adjustments. Problem: $36K was “one-time” marketing (used every year) $28K in car leases for sales personnel $19K in non-owner bonuses “not needed post-sale” $27K of normal business insurance Final adjusted FCF: ~$340KValuation dropped. Loan size reduced. Buyer injected more equity. 📌 Always test the addbacks.
🧠 Sin Spotlight: Fantasy Free Cash Flow
🧯 Deadly Sin: Addback Abuse = Fake Cash Flow We’ve seen appraisals with: ❌ Business travel labeled as “discretionary”❌ All advertising added back❌ Working owner and spouse payroll erased with no replacement If the addbacks are inflated, the cash flow is fantasy—and so is the value. 📌 SBA valuations must reflect economic reality, not seller … Continue reading 🧠 Sin Spotlight: Fantasy Free Cash Flow
📚 Valuation Myth: All Valuations Are Created Equal
The Myth:As long as the report has a number, it's reliable. The Reality:Not all valuations are based on credible data, accepted methods, or professional standards. Some are biased, boilerplate, or created to hit a target. Why It Matters:Relying on a weak or non-compliant valuation can lead to poor decisions — or SBA loss of guarantee. … Continue reading 📚 Valuation Myth: All Valuations Are Created Equal
✅ Global Cash Flow ≠ Business Value
💬 Lenders use global cash flow to underwrite loans. But business valuation? That’s a different animal. Here’s why you can’t justify a higher price using global cash flow. 👉 Read our white paper on Global Cash Flow vs. Free Cash Flow
Understanding Risk and Return in Closely Held Businesses: A Guide for SBA 7(a) Lenders
Evaluating the risk and return of a business acquisition is central to SBA 7(a) underwriting. Closely held or family-controlled businesses present unique financial dynamics: opaque markets, limited liquidity, and owner concentration. These realities significantly alter their risk-return profile compared to publicly traded companies. This guide explores how SBA lenders can evaluate such businesses rigorously, using … Continue reading Understanding Risk and Return in Closely Held Businesses: A Guide for SBA 7(a) Lenders
Lender Insights: Checkpoints for SBA Underwriting
Use these short callouts as quick reminders or margin notes to help identify key risks and reinforce SBA lending best practices. Lender Insight #1 Analyze a 3-year break-even analysis and working capital needs under downside scenarios. This helps evaluate business feasibility and funding sufficiency. Lender Insight #2 If only one valuation method is used in … Continue reading Lender Insights: Checkpoints for SBA Underwriting
Working Capital Guide
Use this guide to evaluate whether working capital (WC) has been properly addressed in a business valuation and underwriting for SBA lending purposes. Step 1: Identify WC Components Accounts Receivable (AR) Inventory Accounts Payable (AP) Accrued expenses Step 2: Evaluate Treatment in Valuation Is WC included in the purchase price or treated as a separate … Continue reading Working Capital Guide
Highland Global Business Valuations 